PM announces ‘effects test’ is to come

Australian prime minister Malcolm Turnbull has today announced that the ‘effects test’ will be introduced into the Australian Competition and Consumer Act.

Introducing the test will change Section 46 of the Competition and Consumer Act which deals with misuse of market power by big businesses acting alone. Until now,. Section 46 stipulated that to be found guilty of misuse of power, a business with substantive market power must have planned to and acted in a way that misused its power in an anti-competitive manner.

Under the effects test the Australian Consumer and Competition Commission (ACCC) will only have to prove the large business acted in an anti-competitive manner. It will not have to prove it had the intention to misuse market power.

The effects test has previously drawn criticism with both Coles and Woolworths speaking out against it. In January 2016 Australian Food News reported that ex-ACCC Chairman Graeme Samuel said he was worried it could limit access to cheap groceries.

At the time Samuel said the effects test would give smaller businesses an unfair advantages and that bigger companies (such as major supermarkets) may be afraid to lower prices.

Former Prime Minister Tony Abbott had rejected the effects test but it has been under consideration again since Malcolm Turnbull became Australian Prime Minister in September 2015.